Brazil this year overtook Germany as the fourth-biggest car market in the world -- and foreign investors see huge potential as the Latin American giant becomes increasingly prosperous.

Brazil overtakes Germany as 4th biggest car market

Brazil this year overtook Germany as the fourth-biggest car market in the world -- and foreign investors see huge potential as the Latin American giant becomes increasingly prosperous.

At the end of 2010, a total of 3.45 million vehicles are forecast to have been sold in Brazil, nearly 10 percent more than last year, according to the national automobile manufacturers' association Anfavea.

That would position Brazil behind China, the United States and Japan in sales of cars and light trucks, and just ahead of Germany.

"This in itself is already big attraction for a growing market, with a low density of vehicles per inhabitant," Anfavea president Cledorvino Belini told AFP.

He explained that Brazil, with a population of 192 million, had approximately one vehicle per seven residents, leaving plenty of room for growth.

There are some 30 million vehicles in total in Brazil, and the world's big car companies expect that fleet to balloon as the country's economic boom creates more consumers.

Europe and the United States, in contrast, are seen as saturated markets with minimal growth prospects.

Brazil "is a market that should keep growing over coming years, and that is attracting a lot of investment," said Belini, who is also the head of the Brazilian subsidiary for Italy's Fiat.

"We have competent workers. We also have all the primary materials for our product," along with a dynamic economy, controlled inflation and easy credit for car-buyers, he said.

To underline the corporate optimism in Brazil, Fiat last week announced it was building a second factory in the country to the tune of 1.8 billion US dollars. That was part of a 5.9-billion-dollar investment plan for Brazil that Fiat is rolling out between 2011 and 2014.

Fiat is intent of keeping its number one status in the Brazilian market, where it accounts for 23.1 percent of sales.

Germany's Volkswagen is a close second with 22.7 percent, and US group General Motors is in third place with 21.2 percent, according to the national car dealers' federation.

In terms of manufacturing, Brazil is the sixth-biggest vehicle producer in the world, turning out 3.64 million units under 17 different brands.

That base looks set to expand further with South Korea's Hyundai and China's Chery poised to also open factories.

That highlights Brazil's enviable dual role as both Latin America's biggest market, and "a production and development hub" for the region, Belini said.

Sixty percent of Brazil's auto exports go to Argentina, while another 20 percent go to other parts of the continent, Anfavea said.

In terms of vehicle imports, 50 percent come from Argentina, 22 percent from South Korea and China, 10 percent from Mexico and 6.5 percent from Europe and the United States.

The panorama could change, though, as Brazil's currency, the real, continues to soar against the dollar and the euro. That makes imported vehicles sought after by class-conscious Brazilians more affordable, and makes Brazilian exported vehicles more costly.

"We are feeling difficulties in competing in foreign markets, and at the same time imports are growing," Belini admitted.

For now, however, the situation is rosy, with 780,000 vehicles being sold abroad, 64 percent more than 2009.